Comment: A different hundred days

Deliver more than could be reasonably expected and do it with humility, spirit of service and visible impact without fanfare or pomposity. Plus, do it under exceptionally challenging and fraught circumstances with few allies and many critics.

Prime Minister Shehbaz Sharif is doing just that -- and hence setting Pakistan on a path to independence. A path where 'we the people' can take over and fulfil any destiny we choose for ourselves. Ultimately, the task is up to us, the sovereign people of this great nation.

When PM Shehbaz took oath on March 4, 2024, it ended an exceptionally volatile and disruptive chapter in our history. We stood isolated from our friends, fiscally bankrupt, politically divided, and without credibility, having reneged on our sovereign commitments to lenders.

With this backdrop, PM Shehbaz made his inaugural address in which he declared his intent: Complete economic transformation based on lean and efficient government; an effective revenue collection mechanism via digitization and world-class human capital; and by attracting investment by the government stepping out of owning and running business, via a transparent privatization process and rapid deregulation to make investment and business more convenient and attractive. He also indicated support for critical sectors to generate employment and boost exports.

With this centerpiece, the prime minister hoped we could integrate into productive global supply chains to harness our endowment and grow our economy and revenue base to be able to deliver a better future for the people of Pakistan. This was not only a declaration of intent but also suggested the likely action plan for the first 100 days. Let us consider progress along this plan.

In his first 100 days, the prime minister did what he’s renowned for: he strategized, prioritized, and acted. And act he did -- most decisively, effectively and at the top speed possible in a machinery not known for its alacrity.

Here is a firsthand summary of what has been done. The list is long, so I have restricted it to only the most important actions vis-a-vis the economy.

The prime minister has launched a comprehensive digitization and HR-based restructuring of the Federal Board of Revenue (FBR). It is impossible to deliver good governance in a contemporary economy while collecting a meager 9.0 per cent or so of GDP as tax with 90 per cent contributed by less than 200,000 payors. Never satisfied by incremental changes, the prime minister requested a world-class donor institution to appoint the world’s top consultants for this task. This was done in less than two weeks, itself a speed record. The reform has been underway for a month and once completed, the perennial issue of inadequate and inequitable revenue collection should be solved. This digitization-based reform effort, links of course to the larger Digital Pakistan Initiative the prime minister has initiated (I say initiated because this time it will happen). This is being led by globally reputed experts, duly budgeted and authorized, to finally establish the Pakistan Stack and digitize and interconnect our most critical data and processes to unlock further speed, transparency and value.

Next, on the equally critical subject of privatization, the prime minister has been clear, and unwavering: Pakistan’s state-owned enterprises (SOEs) will be privatized. He observed that had PIA and associated entities been privatized in 2014, we would have avoided Rs850 billion of accumulated losses. The privatization process continues apace. PIA and holdings will go first, followed by power distribution companies and then the more than 80 SOEs that instead of growing into global champions in the right hands, continue to burden public funds through limited capabilities and negligence. All enterprises not directly affecting the security and defence needs of Pakistan will be privatized. This includes profitable ones where monopoly profits may be concealing costly inefficiencies.

Further, on controlling the cost of government, PM Shehbaz Sharif has mandated top-down expense reductions across all ministries as well as sought evidence of the need for the numerous government departments that may have outlived their utility. The announcement that the Public Works Department would be shut down put all public bodies on notice.

The PM intends to establish meritocracy in government so that only the best thrive. He has held individuals responsible when their performance was subpar for example, 12 senior FBR officials were found to be derelict in their duties. He has penalized inefficient officers, separating them from their sinecures on the spot. Lastly, 70,000 unfilled positions in the public sector have been permanently eliminated. This is a start and, in a year, or so we can look forward to a better-performing government machinery delivered at lower expense.

Finally, in the investment arena, the PM has adopted an open-for-business approach. He has started removing barriers to investment, with the SIFC helping navigate redundant and overlapping crimson tape which only discourages investors. Several slow-moving areas -- like repatriation of dividends, tax refunds and resolving tax disputes -- have been accelerated. Decisions needed to jump-start sectors were taken on the spot. These include providing competitive power tariffs for export-oriented industries, allowing IT & Services to invest abroad, and approving industry status for the cold chain. These reforms plus attractive investment opportunities will be marketed globally.

But the greatest contribution to attracting investment has been the prime minister himself. Through personal outreach and visits plus delegations exchanged with Saudi Arabia ($5 billion earmarked), UAE ($10 billion committed), China (numerous public and private sector memoranda of understanding signed), Iran ($10 billion of trade targeted), and with the heads of Qatar and Kuwait already accepting his invitations to visit, our global ties have restored in heartwarming fashion and speed. While cross-border investments take time, the evident respect for the PM’s authenticity, credibility, and reputation for action with every leader he met portends great things to come. His message to them has consistently been: We are building an independent Pakistan, so we seek investment, trade and partnership but not debt or aid.

We’ve all heard long-term claims before, but do we have any early evidence for the sincerity and effectiveness behind these economic reforms? Sure, plenty.

First, the budget, which given our pressing fiscal needs is fair and balanced, prioritizing expanding the tax base, including untaxed sectors, punishing evaders, and doing the best possible to avoid further burdening the already heavily taxed. Certain tough decisions were inevitable but as FBR reforms take hold, the burden should shift further towards evaders and untaxed sectors. Amongst the prizes for increased revenue is the almost 60 per cent increase in the PSDP which should help spur development despite the difficult fiscal conditions we face.

Second, the exciting macroeconomic gains. The current account deficit first stabilized, then turned into surplus for the last three months, cumulatively reaching almost $1 billion till April 24. Increasing exports, especially in IT which recorded a highest-ever level at $310 million in April and remittances, which also hit a record $3.2 billion in May, have contributed to the surplus. Reserves have exceeded $9 billion with a stable exchange rate near Rs280 to the dollar. FBR collection surged by 31 per cent year over year. Finally, and critically, inflation mellowed to 11.8 per cent, a great relief over the stubbornly high levels of recent years. This rapid drop triggered the SBP's 50 basis point cut in the policy rate which should spur growth.

As a result of these improvements, sentiment has risen attracting $359 million of FDI in April and leading to the PSX recording its highest single-day jump of 3,000 post-budget to about 77,000, parsecs away from the sub 30,000 levels of 2019.

Some of the steps taken to change our trajectory are as unpopular as they are necessary. The prime minister, more than anyone else, has borne the cost of these. But he is fully committed to paying any price for the economic transformation he seeks for the prosperity of the people of Pakistan. Progress must be gauged against honest and realistic goals. We were not going to transform into an economic powerhouse, welfare state in a hundred days. At the same time, no one expected the rapid progress and gains listed above, even as recently as 100 days ago let alone at the nadir of our despair in 2022.

Small gains inevitably build on themselves and multiply over time into vastly differing futures. We already have plenty of evidence that what is underway is real, sincere and effective. And this should inspire confidence enough to remain positive and patient as we build a better Pakistan.

Let us shout this from our rooftops for a change.

The writer is a member of the Prime Minister’s Economic Advisory Council, ambassador-at-large for investments, and Senior Partner emeritus at McKinsey.